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A project report sm 2

  1. 1. A Project Report On Submitted To: Prof. S C Reddy Submitted By: Mahendra Mistry (56) Priyanka Nath (68) Rajesh Patani (78) Aanal Thakar (115)S.K. Patel Institute of Management & Computer Studies 1
  3. 3. EXECUTIVE SUMMARYFMCG industry is the most emerging industry nowadays in Indianas well as global market. In India it is the 4th largest market, whichshows that how important the industry is and how much itcontributes towards our economy.FMCG includes the personal care products also like soaps,shampoos, etc. so our project mainly focuses on the market andstudy of BATH SOAPS IN INDIA. It consists various multi nationaland domestic companies. Major players are Unilever(HLL), Nirma,Godrej, Johnson & Johnson, colgate-palmolive, etc.Our main focus is on Hindustan lever ltd, Nirma, and Godrej. HLL ishaving largest market share within our country which gives toughcompetition to other local and domestic companies also. Bath soapmarket is gradually developing very fast and day by day many newvarieties, flavours, and fragrances, are added in it by variouscompanies to exist in the market.Our project consists study of 3 major players of bath soap marketand their SWOT analysis, BCG Matrix, 5 forces model of theindustry and the companies. Various suggestions andrecommendations are also been given to the FMCG sector bathsoap segment. HLL is the most dominating company across theworld in FMCG sector due to its vertical and horizontal integration.Then also Nirma and Godrej are trying to give tough fight to it.Main mantra for success of the companies is the diversification oftheir business and their products. Thus the study provides detailedstudy of FMCG sector with focus on bath soap industry. 3
  4. 4. INTRODUCTION History of Bath-soap Soap has been with us in one form or another for thousandsof years. The story goes that in Rome in around 1,000 B.C. at aplace called Sapo Hill, the women were washing their clothes in asmall tributary of the river Tiber, below a religious site where animalsacrifice took place. They noticed that the clothes became cleanupon contact with the soapy clay which was dripping down the hilland into the water. It was noticed later that this cleansing agent wasformed by the animal fat soaking through the wood ashes and intothe clay soil. Strangely, in the first century A.D., the Romans are creditedwith the making of a soap-like substance using urine. Theammonium carbonate in the urine was reacted with oils and fat inwool to form this soap. During the Eighth Century the Spanish and Italians beganmaking what was more like modern soap from Beech Tree ash andGoat fat, whilst the French are credited with replacing the animal fatwith Olive oil. In England during the 17th century under King James I, soapmakers were given special privileges and the soap industry starteddeveloping more rapidly, although soaps were generally still madeusing caustic alkalies such as potash, leached from wood ashesand from carbonates from the ashes of plants or seaweed. Thesoaps made in this way were harsh and often rather unpleasant. Soap as we know it today did not come about until the 18thcentury, when Nicholas Le Blanc, a Frenchman, discovered areliable and inexpensive way of making sodium hydroxide (causticsoda), or lye as it is known to the soap maker, which forms the basewith which soaps are made to this day. Further developments in soap making were pioneered inBritain during the late 18th century with the invention ofTransparent soap by Andrew Pears, the son of a Cornish farmer. 4
  5. 5. This refined soap was known then as it is now as PearsTransparent Soap. Over the years and to the present day, opaque soaps haveremained the favourite, mainly because transparent soaps tend tobe more expensive and also dont last as long. Factors likely to encourage soap marketing and consumptionin developing countries in the future include: • More discriminating educated and aware consumers. • Growth of the media, especially TV • Improvements in transportation and communication networks. • Innovative R&D for raw materials and finished products. • Growth of supermarkets and retail outlets. • High speed packaging machines and attractive packaging materials. • State of the art technology to enhance productivity and reduce cost. • Increasingly talented advertising and market research agencies. • Liberalisation of markets and growth in free trade. 5
  6. 6. INDUSTRY PROFILE The Fast Moving Consumer Goods (FMCG) sector is thefourth largest sector in the economy with a total market size inexcess of Rs 60,000 crore. This industry essentially comprisesConsumer Non Durable (CND) products and caters to the everydayneed of the population.Product CharacteristicsProducts belonging to the FMCG segment generally have thefollowing characteristics: • They are used at least once a month • They are used directly by the end-consumer • They are non-durable • They are sold in packaged form • They are brandedIndustry SegmentsThe main segments of the FMCG sector are: • Personal Care: oral care; hair care; skin care; personal wash (soaps); cosmetics and toiletries; deodorants; perfumes; paper products (tissues, diapers, sanitary); shoe care.Major companies active in this segment include Hindustan Lever;Godrej Soaps, Colgate-Palmolive, Marico, Dabur and Procter &Gamble. • Household Care: fabric wash (laundry soaps and synthetic detergents); household cleaners (dish/utensil cleaners, floor cleaners, toilet cleaners, air fresheners, insecticides and mosquito repellants, metal polish and furniture polish). 6
  7. 7. Major companies active in this segment include Hindustan Lever, Nirma and Reckitt & Colman. • Branded and Packaged Food and Beverages: health beverages; soft drinks; staples/cereals; bakery products (biscuits, bread, cakes); snack food; chocolates; ice cream; tea; coffee; processed fruits, vegetables and meat; dairy products; bottled water; branded flour; branded rice; branded sugar; juices etc. Major companies active in this segment include Hindustan Lever, Nestle, Cadbury and Dabur. • Spirits and Tobacc Major companies active in this segment include ITC, Godfrey Philips, UB and Shaw Wallace. An exact product-wise sales break up for each of the items is difficult. The size of the fabric wash market is estimated to be Rs 4500crore; of household cleaners to be Rs 1100 crore; of personal washproducts to be Rs 4000 crore; of hair care products to be Rs 2600crore; of oral care products to be Rs 2600 crore; of healthbeverages to be Rs 1100 crore; of bread and biscuits to be Rs 8000crore ; of chocolates to be Rs 350 crore and of ice cream to be Rs900 crore. In volume terms, the production of toilet soap is estimated tohave grown by four per cent in 1999-2000 from 5,30.000 tonnesfrom 5,10,000 tonnes in 1998-99. The production of syntheticdetergents has grown by eight per cent in 1999-2000 to 2.6 milliontonnes. The cosmetics and toiletries segment has registered a 15per cent growth in 1999-2000 as against an annual growth of 30 percent recorded during the period 1992-93 to 1997-98. In the packaged food and beverage segment, ice cream hasregistered a negligible growth and the soft drink industry hasregistered a six per cent growth in 1999-2000. 7
  8. 8. Toilet Soap Industry in India: Today, the FMCG sector is the fourth-largest sector in theIndian economy, with an estimated total market size of around Rs450 bn. Further, the growth potential for all the FMCG companies ishuge, as the per capita consumption of almost all products in thecountry is amongst the lowest in the world. Further, if thesecompanies can change consumers mindset and offer newgeneration products, they would be able to generate higher growth.For example, Indian consumers used to wear non-branded clothesfor years, but today, clothes of different brands are available and thesame consumers are willing to pay almost 5 times more for brandedquality clothes. It is the quality and innovation of products, which isreally driving many sectors. Thus, FMCG companies should usetheir imagination and respect the tastes of Indian consumers byoffering quality products. Toilet soap industry is one of the oldest Fast MovingConsumer Goods (FMCG) industry in India. It is among the highestpenetrated category within FMCG sector reaching an estimated95% urban and 87% of the rural households. In value terms theindustry is worth Rs.45000million and in volume terms it is worth .53million . The main characteristic of the industry was severecompetition and high level of brand proliferation. Toilet soapsaccount for more than 50% of the Consumer After expanding at a snails pace, the market for personalwash products appears to have come to grinding halt in 2001. After posting a modest single digit growth in 1997-2000,figures for the first seven months of this year suggest that themarket for toilet soaps has actually shrunk. Estimates about the extent of the decline of market size vary.Hindustan Lever, which straddles the category with a 59.9 per centmarket share by value, says the market shrank by 4.4 per cent invalue terms in the first half of 2001. The Indian Soaps and Toiletries Manufacturers Association,puts the decline at 1 per cent. Other industry sources suggest thatthe extent of `de-growth in the first eight months of 2001 could beas high as 7 per cent. 8
  9. 9. This is despite the fact that this usually sleepy category hasseen a spate of new players debut new offerings in recent times.Over the past couple of years, Nirma has launched a slew of low-priced soaps under the banner of Nima and Nirma Beauty. GodrejConsumer, a long-standing player, has relaunched old brands suchas Cinthol, apart from new ones such as FairGlow, Allcare, andNikhar. Henkel SPIC has made a maiden foray into the market withthe Fa range of soaps. Colgate Palmolive has pepped up its soaprange with extensions such as Palmolive Naturals and PalmoliveExtra Care. The market leader HLL, has relaunched Breeze, apartfrom launching Skin Care and Sunscreen variants of its premiumsoap -- Lux International. If the shrinking market size suggests that Indian consumershave actually been cutting back on their use of toilet soaps, this isnot really the case. In volume terms, the market for toilet soaps hascontinued to show a growth of 6 per cent in the first eight months of2001. The major players have certainly managed to sell more toiletsoaps by volume. But price competition in the segment and a slewof promotional campaigns have reduced the effective realisationsper unit sold. This has probably neutralised the gains from volumeexpansion. Theories about the reasons for the shrinking the marketsize vary.Low-priced brandsIndustry players commonly attribute the `de-growth in the soapmarket to downtrading. Toilet soaps are among the highestpenetrated products within the FMCG market, reaching anestimated 95 per cent of the urban and 87 per cent of the ruralhouseholds. The fairly high contribution from the rural market makesthis category sensitive to the fortunes of the agricultural economy. The prolonged drought in the North and West of the country(until 2000) and the sharp fall in farm disposable incomes (broughton by falling farm product prices) has probably persuaded low- 9
  10. 10. income households to downtrade, that is, switch from high- to low-priced brands. This is indeed supported by the fact that within toilet soaps, itis the discount segment (soaps that cost between Rs 5 and Rs 8per 75 grams) that has registered the highest growth rates over thepast year. HLL, too appears to endorse the phenomenon of downtrading.``There has been an inter-sectoral shift in the soap market, withconsumers downtrading from premium and popular to discountsoaps, explains the companys spokesperson. However, Mr Hoshedar K. Press, Godrej Consumer Care,begs to differ. ``We think consumers have already pre-committedtheir incomes for instalments on durables. The substitution of soapwith shampoos for hair wash has also impacted growth, he said.Better quality The crowded market place has also brought a few benefits tothe consumer as marketers of soap have tried to woo consumersthrough upgraded offerings and better quality soaps. Aided by lowinput prices, the marketers of toilet soaps have increased the TFM(total fatty matter) content in their brands, to offer better qualitysoaps at a lower price. Industry watchers say that the TFM contenton some brands has moved up from the 50-60 per cent earlier toover 70 per cent of late. Therefore, per unit realisations on soaps have declined, themarketers of soaps have actually sacrificed a part of their marginson hiking the TFM content.Tough times ahead With competitive pressures on the rise and a larger number ofbrands jostling for consumer attention in a sluggish market, thesoap market is likely to remain a difficult one for most players.Smaller players such as Godrej Consumer and Henkel SPIC havebeen in a position to report robust sales growth in the category overthe past year despite the bruising competition. However, this is partly due to a relatively small base ofcomparison. Unless the market expands, the frenetic promotional 10
  11. 11. activity may soon tell on the growth rate of the players. And when itcomes to sustaining a high decibel promotional campaign, HLLssize certainly gives it the wherewithal to do it. Rural revival -- A wild card It appears that a genuine boost to the market size for toiletsoaps will still have to come from a revival in rural demand.Evidence from the past does appear to suggest that a sharp rise inrural incomes would have a cascading effect on FMCG demand.The pick-up in volume growth in the soap market in 1999, after ayear of sluggish growth in 1998, demonstrated that a recovery inagricultural output does have an indirect impact on sales volumes ofFMCG products. This year, reports of a good monsoon in the northern andwestern parts of the country have sparked off speculation about arevival in FMCG growth rates. The fact these two regions accountfor 55 per cent of the demand for FMCG products strengthens thisargument. However, it appears to be a bit early in the day to call it arevival. For one, while the northern and western regions havereceived satisfactory rains, southern India has been the victim of avery erratic monsoon. Second, given that the good monsoon in thecurrent year succeeds two or three consecutive years of drought insome regions, there could be a substantial time lag before higherrural incomes translate into better FMCG demand Third, the key crisis in agriculture over the past year has beenthat farm product prices have dropped sharply in response to a buildup of surplus foodgrain stocks. Therefore, even if a good monsoontranslates into a higher agricultural output, there is the question ofwhether this will actually expand or shrink farm incomes. These factors suggest that it may be premature to takeinvestment exposures in companies focussed on toilet soaps in thehope of a revival. It may be better to wait for concrete signs of apick-up in rural demand, which is certainly some way off.Nature of the global Industry The global soap market is dominated by a small number ofmultinational companies. Soap is only one sector of their product 11
  12. 12. ranges. In multinational companies such as Unilever and Procter &Gamble, soap and detergent ranges typically account for lessthan 20% of group turnover (in 1999). The largest toilet soaps and detergents only company, byvolume sales, is the Unilever Group, which has strong presence inall regional markets in the world. The top ten leading manufacturersand distributors of soap worldwide account for more than 55% oftotal sales by value in 1999, totalling in excess of US$80billion.Position Company % Value of World1 Unilever 10.072 Procter & Gamble 7.413 Gillette Group 7.664 Colgate Palmolive 4.5Promotion and branding Soap manufacturers start their marketing strategy by firstidentifying whether a marketing opportunity exists. They proceed todetermine whether to target the mass market or a niche market, andsubsequently position their products. Very often, “metoo” lookingproducts, despite their superior performance, fail to break the barrierof routine buyer behaviour. Where the market is crowded,companies try to differentiate their products by new forms or newpackaging concepts.With the increase in both domestic and global competition,companies are having to deal with and reconcile two conflictingelements in marketing strategy – namelyprofitability and market share. Greater market share involves highermarketing costs and lower profitability. In India, Hindustan Leversshare of the soap and detergent market was dented severely by theNirma (an Indian national, privately owned company) strategy ofdeveloping a product especially for the poor, until Lever managed todevelop its own product. A teaser ad on Lux soap recently unleashed by FMCG-majorHindustan Lever (HLL) gives an indication that the company is 12
  13. 13. planning to launch a soap which protects fairness -- in evidentcompetition to Godrejs FairGlow fairness soap. The Lux commercial was kicked off almost in tandem with thelaunch of FairGlow, which is touted as Indias first fairness soap.FairGlow has marked a breakthrough in the stagnant toilet soapsmarket and has kindled hopes of fuelling growth with the creation ofa new category. The industry was rife with speculation that market leader HLLwould follow in the footsteps of Godrej Soaps to launch a soapproduct on the same USP. While details of the proposed Lux soapare not available, the product is expected to be launched in the nextfortnight. The ad depicts how, by using the soap, one can block the sunrays from tanning the skin surface. However, the ad does not revealthe name of the product. But it clearly signals that a new productoffering from the Lux stable, albeit on the fairness plank, is in thepipeline. It has been a couple of weeks since the teaser ad waslaunched on select channels. The move is seen by industry observers as a knee-jerkreaction to combat the launch of FairGlow. The only catch here isthat while Godrej Soaps directly claims delivering fairness throughFairGlow, the proposed Lux product talks about protecting fairnessby offering sunscreen benefits. FairGlow is being promoted as abeauty and complexion soap which contains a bio-extract callednatural Oxy-G which is said to make skin fairer naturally. For Levers, point out industry analyst, it is crucial to defendany market share erosion at a time when the industry is strutting atgrowth levels of 2-3 per cent per annum. Given that the Rs 2,900crore industry has reached saturation levels in penetration in bothurban and rural markets, it is becoming increasingly challenging formarketers to develop value-added soap products in the market. Industry analysts point out that manufacturers will have todesign products which offer unique benefits so as to stoke volumesgrowth. It is not surprising then that FairGlow is targeted at bothmen and women. Research findings show that a section of men tooare users of fairness creams. 13
  14. 14. EstProduction (market 2002-2 % EST % Unit 2003-20size) 003 growth growth 04FMCG (overall) Rs billion 600 2% 609 1.5%Soap & Toiletries Rs billion 90 -5% 90.9 1%(overall)Soap & Toiletries Mn tonn 60 4% 60.09 1.50%(overall) There were 45 leading national brands. None of the nationalbrands had more than 5% market share and many more regionaland unorganised sector/local brands. 9Hindustan Lever was themarket leader with about 30 (number) of toilet soap brands with atotal market share of 67% in 1998-99 in organised sector as seenfrom Table-1 below, which gives the lead players and theirrespective market share.Table-1: The Lead Players and their Market Share Percentage of Market Company Share HLL 67 Godrej 10 Nirma 8 Colgate Palmolive 1 Others 14 Source: Vanscom Database 14
  15. 15. Percentage of Market Share HLL Godrej Nirma Colgate Palmolive Others The leading brands in the market are Dove, Pears, Lux,Dettol, Liril, Rexona, Lifebuoy, Nirma, Palmolive and Hamam. Asurvey reported in Vanscom, which was conducted in Ahmedabad,showed that 103 toilets soap brands were available in this cityalone. The industry had witnessed many innovative sales promotionactivities in the recent past. Numerous factors were responsible forsuch a phenomenon. One of the reasons being that the marketbeing sluggish, companies were trying to increase market share instagnant to declining (volume terms) market in order to retainconsumers, to encourage switching, to induce trials and liquidateexcessive inventories. Another reason possible was that with thepresence of so many brands the competition had increasedseverally leading to fight for market share and shelf space.Inflationary trend had made both the consumer as well as trade dealprone. Due to such a dense market like India big companies adoptdifferent strategies and coming up with various sales promotionschemes continuously.Today big players in Indian bath-soap market are… 1. HLL (Hindustan lever limited –a subsidiary of Unilever) 2. Godrej 3. Nirma 15
  16. 16. 4. P&g (Procter and gamble) Among these players HLL is the biggest player with around 67%of market share. For HLL most of the soap has become a brandthey have their own identity.LUX is the most recalled soap in themind of the consumers. For these main four players , each soap is described in brief asan introduction about which soap belongs to which company. There is a strong MNC presence in the Indian FMCG market andout of the top 10 FMCG companies, four are multinationals whiletwo others have significant MNC shareholdings. Unlike severalother sectors where multinationals have entered after 1991, MNCshave been active in India for a long time. The top five listed FMCGcompanies on the basis of their sales turnover in the last financialyear (either year ended December 31, 1999 or March 31, 2000) are:Company Name ym(finance_year) sales Profit After Rs. Tax Crores Rs. CroresHindustan Lever Ltd. 199912 10978.31 1073.73I T C Ltd. 200003 7971.94 792.44Nirma Ltd. 200003 1717.88 234.1Nestle India Ltd. 199912 1546.43 98.47Britannia Industries Ltd. 200003 1169.84 51.02Colgate-Palmolive 200003 1123.53 51.79(India) Ltd.Godfrey Phillips India 200003 1082.63 42.1Ltd.Dabur India Ltd. 200003 1046.28 77.67Smithkline Beecham 199912 743.38 97.61Consumer HealthcareLtd.Godrej Soaps Ltd. 200003 714.74 61.89Marico Industries Ltd. 200003 649.05 35.73 16
  17. 17. Cadbury India Ltd. 199912 511.08 36.7Procter & Gamble 200006 492.85 75.03Hygiene & Health CareLtd.Reckitt & Colman Of 199812 435.33 31.47India Ltd.I S P L Industries Ltd. 199903 21.57 0.04 Among the major companies, Hindustan Lever has a strongpresence in the food, personal care and household care(detergents) sectors; ITC is the market leader in cigarettes; Nirmahas a strong presence in the detergent market; Nestle and Britanniaare active in the food sector and Colgate has a strong presence inthe oral care segment.Exports India is one of the world’s largest producer for a number ofFMCG products but its FMCG exports are languishing at around Rs1,000 crore only. There is significant potential for increasing exportsbut there are certain factors inhibiting this. Small-scale sectorreservations limit ability to invest in technology and qualityupgradation to achieve economies of scale. Moreover, lower volumeof higher value added products reduce scope for export todeveloping countries. 17
  18. 18. INDUSTRY SWOT ANALYSISStrengths:• Well-established distribution network extending to rural areas.• Strong brands in the FMCG sector.• Low cost operationsWeaknesses:• Low export levels.• Small scale sector reservations limit ability to invest in technology and achieve economies of scale.• Several "me-too’’ products.Opportunities:• Large domestic market.• Export potential• Increasing income levels will result in faster revenue growth.Threats:• Imports• Tax and regulatory structure• Slowdown in rural demand 18
  19. 19. FMCG Introduction The Fast Moving Consumer Goods (FMCG) sector is thefourth largest sector in the economy with a total market size inexcess of Rs 60,000 crore. This industry essentially comprisesConsumer Non Durable (CND) products and caters to the everydayneed of the population. Product CharacteristicsProducts belonging to the FMCG segment generally have thefollowing characteristics:• They are used at least once a month• They are used directly by the end-consumer• They are non-durable• They are sold in packaged form• They are branded Industry SegmentsThe main segments of the FMCG sector are: • Personal Care: oral care; hair care; skin care; personal wash (soaps); cosmetics and toiletries; deodorants; perfumes; paper products (tissues, diapers, sanitary); shoe care. • Major companies active in this segment include Hindustan Lever; Godrej Soaps, Colgate-Palmolive, Marico, Dabur and Procter & Gamble. • Household Care: fabric wash (laundry soaps and synthetic detergents); household cleaners (dish/utensil cleaners, floor cleaners, toilet cleaners, air fresheners, insecticides and mosquito repellants, metal polish and furniture polish). • Major companies active in this segment include Hindustan Lever, Nirma and Reckitt & Colman. 19
  20. 20. • Branded and Packaged Food and Beverages: health beverages; soft drinks; staples/cereals; bakery products (biscuits, bread, cakes); snack food; chocolates; ice cream; tea; coffee; processed fruits, vegetables and meat; dairy products; bottled water; branded flour; branded rice; branded sugar; juices etc. • Major companies active in this segment include Hindustan Lever, Nestle, Cadbury and Dabur. • Spirits and Tobacc Major companies active in this segment include ITC, Godfrey Philips, UB and Shaw Wallace. An exact product-wise sales break up for each of the items isdifficult. The size of the fabric wash market is estimated to be Rs 4500crore; of household cleaners to be Rs 1100 crore; of personal washproducts to be Rs 4000 crore; of hair care products to be Rs 2600crore; of oral care products to be Rs 2600 crore; of healthbeverages to be Rs 1100 crore; of bread and biscuits to be Rs 8000crore ; of chocolates to be Rs 350 crore and of ice cream to be Rs900 crore. In volume terms, the production of toilet soap is estimated tohave grown by four per cent in 1999-2000 from 5,30.000 tonnesfrom 5,10,000 tonnes in 1998-99. The production of syntheticdetergents has grown by eight per cent in 1999-2000 to 2.6 milliontonnes. The cosmetics and toiletries segment has registered a 15per cent growth in 1999-2000 as against an annual growth of 30 percent recorded during the period 1992-93 to 1997-98. In the packaged food and beverage segment, ice cream hasregistered a negligible growth and the soft drink industry hasregistered a six per cent growth in 1999-2000. 20
  21. 21. BCG MATRIXThe BCG matrix method can help understand a frequently madestrategy mistake: having a one-size -fits-all-approach to strategy,such as a generic growth target.In such a scenario:A. Cash cows business units will beat their profit target easily; theirmanagement has an easy job and is often praised anyhow. Even,worse they are often allowed to reinvest substantial cash amountsin their businesses, which are mature, and not growing anymore.B. Dogs business units fight an impossible battle and, even worse,investments are made now and then in hopeless attempts to ‘turnthe business around’.C. As a result (all)question marks and stars business units getmediocre size investment funds. In this way they are unable to everbecome cash cows. These inadequate invested sums of money area waste of money. Either these SBUS should receive enoughinvestment funds to achieve a real market dominance and becomea cash cow(or star), or otherwise companies are advised todisinvest and try to get whatever possible cash out of the questionmarks that were not selected.Limitations of BCG matrix: Some limitations of Boston consulting group matrix include: • High market share is not only success factor. • Market growth is not the only indicator for attractiveness of a market. • Sometimes dogs can even more cash as cash cows. 21
  22. 22. BCG MATRIX.. HLL: lifebuoy +, ?HLL SanturRexona , Pears Nirma – nirma bath,Lifebuoy, breeze soapJohnson & Johnson - nirma lime soap-Savlon,Dettol, breeze, - camay,Maisur Sandal soap, Godrej- FairglowGodrej-shikakai ,HLL-Lux, Hamam, Colgate pamoliveDove,Liril Godrej-Ganga, GodrejNIRMA-beauty soap No.1Johnson & Johnson breezebaby soapGodrej-Cinthol, Godrejno.Cash cow - 22
  23. 23. A business unit has a large market share in a mature, slow growing industry. Cash cows require little investment and generate cash that can be used to invest in other business units.Star - A business unit that has a large market share in a fast growing Industry. Stars may generate cash, but because the market is growing rapidly they require investment to maintain their lead. If successful, star will become a cash cow when its industry matures.Question mark (problem child) - A business unit that has a small market share in a high growth market. These business units require resources to grow market share, but weather they will succeed and become stars is unknown.Dog - A business unit that has a small market share in a mature industry. A dog may not require substantial cash, but it ties up capital that could better be deployed elsewhere. Unless a dog has some other strategic purpose, it should be liquidated if there is little prospect for it to gain market share. 23
  24. 24. COMPANY PROFILE 24
  25. 25. NIRMA Background Toilet soaps recorded a strong 40% plus volume and value growth The Nirmaby the success of and since then it has expanded its Rose driven story began in 1969 the nIma launch. Besides the detergents(cakes and powders), soaps, soap several fragrance variants such as Nima to a variant, Nirma launched intermediates Alfa Olefin Sulphonate (AOS)level of Rs. 82 and Nima Sandal duringathe year. Other toilet this market and has Lime billion. Today, Nirma has Rs.17 billion share in soap brands Nirma Bath , Nirma Beauty, Nirma Lime and Nirma Premiumbeen acknowledged as a marketing miracle. Nirma known for its focus on costeffectiveness by integrating latest technology also continued facilities with innovative positioned at various price points manufacturing to grow. Toiletmarketing strategies to create from 75,450brands, has by passed MNCs like HLL, soap volumes grew world class tons in FY99 to 106,626 tons inP&G to becomeToilet soap leader (in terms of volumes) in thiswas increased FY00. the market manufacture capacity at Mandali price-sensitiveindustry. from 90000 to 110000 holdspa in FY00 share in the branded detergents In value terms, Nirma tons 16% marketsegment. The manufacturing and marketing operations were divided in several closelyheld group companies. In FY97, Nirma group restructured its operations and merged4 companies, namely Nilinta Chemicals Ltd, Nirma Detergents Limited, Nirma Soapsand Detergents Limited and Shiva Soaps and Detergents Limited, with its flagshipNirma Limited. Kisan Industries, the sole separate detergent manufacturing unit hasbeen merged with Nirma in March 00. Nirma now owns all the detergentmanufacturing facilities of the group, besides toilet soap/other industrial chemicalsmanufacturing facilities and a modern packaging unit owned by Kisan. Marketing of products is carried out through a 100% subsidiary, NirmaConsumer Care Limited (NCCL). NCCL is the licensee for using the trade marks andthe brand Nirma, which are owned by Nirma Chemicals Pvt Ltd. NCCL’s lease for thebrand will be in perpetuity, except in the event of Karsanbhai & Associates equitystake in NCCL falling below 51%. olding Pattern Share Holding Pattern The share capital of the company is Rs.33.9 crore and the total sharesoutstanding amount to 3.39 crore. The face value per share is Rs.10. The stock iscurrently trading at Rs. 418, as on May 28, 2001. The market capitalization of thecompany is Rs.1415.85 crore. The free float is 18% and the promoters hold 72%stake in the company. Business OverviewNirma’s principal business activities pertain to manufacture and sale of detergentsand toilet soap. Nirma dominates the popular detergent segment with brands likeNirma Popular powder, Nirma Detergent powder, Nirma bar, etc. Super Nirma 25detergent powder is positioned in the mid-priced segment. Toilet soaps recorded astrong 40% plus volume and value growth driven by the success of the launch of"NIMA" brand in FY00. Nirma also sells glycerine, LAB and other industrial
  26. 26. Nirma Bath Soap Toilet soap market in India was dominated by a very fewMNCs which could monopolistically price their product. In1992, sensing a strong need to expand the market throughPenetrative Pricing, Nirma entered this market with the launchof ‘Nirma Bath Soap’, which is a carbolic (Red) soap. Althoughthe carbolic soap segment is on decline, Nirma Bath hasgenerated larger volumes each year. Packed in a red colourwrapper and available in 75 gram and 150 gram pack sizes,this soap has a Total Fatty Matter (TFM) of 60 %. Nirma Beauty Soap With its market promise to offer “Better Products, BetterValue, Better Living,” Nirma introduced ‘Nirma Beauty Soap’ inthe year 1992. Available in three different variants and packsizes, this soap has a TFM content of 70%. Due to itsadmirable perfume and a higher TFM content, this brand,within a short span of five years, had achieved the status ofthe third largest selling toilet soap brand and still continues itsoutstanding performance. Nirma Lime Fresh Soap 26
  27. 27. This product had created a sensational marketing history in the Indian Toilet soaps market, when it was launched in 1997. Seventeen million packs of Nirma Lime Fresh soap were sold in the very first month of its soft launch. Packed in a poly coated 75 gm carton, which is printed on the world’s best Cerruti 8-colour printing machine, this soap is available in green colour. With a lime aroma that tingles in one’s sensory buds for a long time, this soap contains 80% TFM. The product launch of Nirma Lime Fresh had been extremely successful, being ranked as the Seventh Most Successful Brand Launch for the year 1998, as ranked by the Business Standard Marketing Derby, 1998. (as featured in The Strategist Quarterly, July-September 1998).StrategyNirmas large capex backward integration projects had beenundertaken with a strategy to become the lowest cost detergentmanufacturer in the world. Self sufficiency in key raw materials willgive protection against commodity cycles besides yieldingsubstantial savings in raw material cost. The company estimates atotal cost saving of 25% in material and handling costs due to thebackward integration projects. The LAB plant has yielded about12% cost savings and the company expects a similar cost saving ofabout 12-15% once the soda ash plant stabilizes. Overall thebackward integration has yielded a cost saving of Rs0.8-1bn lastyear. Post completion of backward integration the company nowplans to focus on building large volumes and gain from economiesof scale. The company plans to tap export markets and is aloslooking at acquisition opportunities or distribution tie uparrangements in other FMCG categories. Branded salt will belaunched by the end of the year. The company is also consideringother categories such as shampoo, toothpaste and fabric whiteners.Earnings sensitivity factors: • Stabilization of backward integration projects • Volume growth in detergents as well as toilet soaps and utilization of expanded capacity • Toilet soap market share : Success of new launches, market share growth will drive profitability. 27
  28. 28. • Commodity price movement of LAB and Soda ash will have significant impact on company’s competitive position, as Nirma will be the only company to have its own raw material production facility. The Consumer products division continued to grow at ahealthy pace of 26% yoy, driven by the success of the Nima launch.Nirma has for the first time diverted from its strategy of umbrellabranding and has launched Nima as a fighter brand - to fightcompetition and the unorganized sector. And the company hasachieved tremendous success. In a scenario where the averageindustry has been growing at a poor 2-3%, the company hasmanaged to almost achieve double digit volume growth. 1. HINDUSTAN LEVER LIMITEDMission 28
  29. 29. Unilevers mission is to add Vitality to life. We meet everyday needs fornutrition, hygiene, and personal care with brands that help people feelgood, look good and get more out of life.Hindustan Lever (HLL), Indias largest fast-moving consumer goodscompany is also the countrys largest company in terms of marketcapitalisation. It leads in home and personal care products, and foods andbeverages with over 110 brands. The Far Eastern Economic Review ratesHLL as the best Indian company and recognises it as one which all otherswant to emulate. Its market capitalisation went up 18% to Rs 324351 mln(taking it to the first position from last years third) when the total marketcapitalisation of the Top 500 companies was down 22%. It now accountsfor almost 8.4% of the total market capitalisation of the Top 500. HLLsrank on other parameters are - capital employed: 87, gross block: 59, sales:8, net profit: 12, net forex earnings: 6 and trading value: 8.Products :LuxRexonaPearsDoveBreezeHamamLirilLifebuoyLuxLux stands for the promise of beauty and glamour as one of Indias mosttrusted personal care brands. Lux continues to be a favorite withgenerations of users for the experience of a sensuous and luxurious bath.Since its launch in India in the year 1929, Lux has offered a range of soapsin different sensuous colors and world class fragrances. 2003 saw one ofthe biggest milestones in the history of Lux. From being just a beauty soapof film stars, Lux recognized the need for a compelling message aboutbeauty that would resonate with women of today.Lux is available in four different variants – Exotic flower petals and JojobaOil, Almond Oil and Milk Cream, Fruit Extracts and Honey in Milk Creamand Sandal Saffron in Milk Cream. 29
  30. 30. RexonaRexona is one of Indias pioneer brands in family soaps. Launched in 1947,it was positioned as a natural skin care soap to give silky, glowing skin.Since then the product has been constantly improved to keep up with theexpectations of the consumers.In 1989 coconut was introduced in Rexona for the first time to strengthenthe overall skincare appeal of the brand. Rexona has now been relaunchedwith cucumber extracts, in addition to coconut oil and moisturising milkcream. Its creamy lather purifies the skin, leaving it clear and flawless. Ithas also been enhanced with a perfume that lingers well after a bath.PearsIntroduced in India in 1902, Pears soap has no equal. It is gentle enough,even for babys skin.Pears is manufactured like any other soap, but unlike in conventionalsoaps, the glycerine is retained within the soap. That is the cause if itsunique transparency. After manufacturing, the soap is mellowed undercontrolled conditions over weeks. At the end of this maturing process, it isindividually polished and packed in cartons.Today Pears is available in three variants - the traditional amber variant, agreen variant for oil control and a blue variant for germ protection.DoveDove soap, which was launched by Unilever in 1957, has been available inIndia since 1995. It provides a refreshingly real alternative for women whorecognise that beauty is not simply about how you look, it is about howyou feel. 30
  31. 31. The skins natural pH is slightly acidic 5.5-6. Ordinary soaps tend to bealkaline, with pH higher than 9. Dove is formulated to be pH neutral (pHbetween 6.5 and 7.5) and to be mild on skin. This makes it suitable for allskin types for all seasons. While Dove soap bar is widely available acrossthe country, Dove Body Wash is available in select outlets.Globally, Dove has been extended to many other countries. Since the1980s, for example, Unilever has launched a moisturising body-wash,deodorants, body lotions, facial cleansers and shampoos and conditioners,providing a comprehensive range of solutions to bring out true innerbeauty.BreezeBreeze Scent Magic is the soap which fulfills the aspirations of women ofrural India. Breeze has offered them beauty at an affordable price, makingthem look and feel beautiful.Research and consumer visits have shown that the desire for greatfragrance featured highest in the daily beauty regime of discount-soapusers. Breeze explores this through the proposition of scent in a soap-Scent ka kamaal, ab sabun mein and explicitly propagates the brandpromise of the "Hameshaa kuchh extra". It delivers all this and stillmatches consumers needs in terms of price and quantity offered, stayingtrue to its word.Breeze has been enriched with 19 special scent oils, which ensure that onesmells good for a long time through the day. Introduced in variants likeScent Magic, Scent Magic Lime, and Scent Magic Sandal, Breeze strivestowards fulfilling the companys mission of being inventive in creatingvalue.Hamam 31
  32. 32. When it comes to soaps, Hamam is considered to be the most reliableoption. Launched in 1934, Hamam has traditionally been a soap that takescare of your skin in a natural way.According to a research conducted By Indica Research in May 2003, 78%of Doctors in Tamil Nadu recommend Hamam.Besides being a perfectly balanced soap, Hamam takes on a very modernand trendy look. Hamams enhanced fragrance now provides a longerlasting freshness. The new attractive oval shaped Hamam comes in anattractive and modern packaging. The ingredients that are used in Hamam -Neem, Tulsi and Aloe Vera - by themselves have great therapeutic values.Hamam, the brand is very true to its tagline that says, "Everything in lifeis about balance".LirilFor 28 years, freshness has been clearly identified with one name – LirilLiril expressions have always set trends whether it is a bathing beauty in awaterfall or "Oof Yu Maa!" The energy and excitement levels associatedwith the brand have to be experienced to be believed with changing times.Liril has donned many avatars; Presently, Liril Soft Aloe Vera & Lime,Liril Icy Cool and Liril Orange splash are making waves.Whats next? Wait and Watch! The show has just begun...LifebuoyMaking a billion Indians feel safe and secure by meeting their health andhygiene needs is the mission of Lifebuoy.The worlds largest selling soap offers a compelling health benefit to theentire family. Launched in 1895, Lifebuoy, for over a 100 years, has beensynonymous with health and value. The brick red soap, with its perfumeand popular Lifebuoy jingle, has carried the Lifebuoy message of healthacross the length and breadth of the country.The 2002 and 2004 relaunches have been turning points in its history. Thenew mix includes a new formulation and a repositioning to make it morerelevant to both new and existing consumers.At the upper end of the market, Lifebuoy offers specific health benefitsthrough Lifebuoy Gold and Plus. Lifebuoy Gold (also called Care) helps 32
  33. 33. protect against germs which cause skin blemishes, while Lifebuoy Plusoffers protection against germs which cause body odour.Hindustan Lever’s SWOT analysisStrengths:With identified strengths including astrong brand portfolio;consumer understanding;R&D ability;distribution reach(networking) and high quality manpowerStrong media personalitiesAs the production is on large scale it has the benefit of economiesof scale. 33
  34. 34. Being very old and reputed company, the company and its brandsachieves highest trust of the consumers.Weaknesses:The companys weaknesses spotted thereby include Increased consumer spends on education, consumer durable,entertainment, travel, etc resulting in lower share of wallet forFMCG;Complex supply chain configuration and unwieldy number of stockkeeping units (SKUs) with dispersed manufacturing locations;Price positioning in some categories that allows for low pricecompetition and high social costs in the plantation business.Opportunities:HLL sees its opportunities asmarket and brand growth through increased penetration especiallyin rural areas;brand growth through increased consumption depth and frequencyof usage across all categories;upgrading consumers through innovation to new levels of qualityand performance;emerging modern trade to be effectively used for introduction ofmore upscale personal care products;growing consumption in out of home categories;positioning HLL as a sourcing hub for Unilever companieselsewhere and leveraging the latest IT technologies.Threats:Perceived threatsspan low-priced competition now being present in all categories; 34
  35. 35. grey importsspurious/counterfeit products in rural areas and small towns;changes in fiscal benefits.3. GODREJVISION:Godrej in every home and work place.MISSION:Enriching quality of life everyday everywhere.We will provide branded products and services of superior qualityand value that improve the lives of the worlds consumers. As aresult, consumers will reward us with leadership sales, profit, andvalue creation, allowing our people, our shareholders, and thecommunities in which we live and work to prosper.VALUES:Integrity, Trust, To serve respect, Environment.Company OverviewGodrej Industries Limited, formally Godrej Soaps, is Indias largemanufacturer of oleochemicals. As well as the chemicals industry,Godrej also operates in the food and medical diagnostics markets.The company is part of the Godrej Group conglomerate. GodrejIndustries is headquartered in Mumbai, IndiaFor the fiscal year ended March 2004, the company generatedrevenues of $417.34 million (Rs18.23 billion), an increase of 9.7%on the previous year. The company saw a net income of $13.14 35
  36. 36. million (Rs573.8 million) during fiscal 2004, an increase of 72.5% onfiscal 2003.Godrej Consumer Prodiucts Ltd (GCPL) was formed wef April1,2001 with the demerger of the consumer business of the erstwhileGodrej Soaps Ltd. GCPL has emerged as a focussed FMCGcompany. Its main product lines now consist of toilet soaps, liquiddetergent, cosmetics such as hair care, fairness creams, etc andmen’s toiletries. The company also undertakes contractmanufacturing of toilet soap for third parties. All interests of theerstwhile Godrej Soaps in other businesses such as industrialchemicals, medical diagnostics and financial investments continuedto remain in the existing entity, post demerger and the company hasbeen renamed Godrej Industries Ltd (GIL)Godrej has the distinction of being the first company in the world todevelop technology to make soap with vegetable oils, way back in1930. In the early 90’s Godrej had created strong brand equities forits leading brands Cinthol, Ganga, Marvel, Evita etc. In 1994, Godrejentered into a strategic alliance with P&G for inter alia toilet soapbusiness, under which Godrej used to manufacture soaps, whichwere marketed by a joint venture company. However post marketingalliance with P&G, the company lost significant part of its marketshare and subsequently the arrangement was discontinued.Godrej’s entire distribution network was then taken over by P&G.Godrej reestablished a distribution network by utilizing the networkof group company Godrej Hicare for marketing of its brands and inFY00 took over the entire distribution network from them.Toilet soaps account for more than 50% of the Consumer businesssales. Hair Color (20%), Contract manufacturing of toilet soap forother industry players (13%), Detergents (6%) and Cosmetics andToiletries (8%) are the other contributors to GCPL’s turnover.Exports of Godrej Brands (2% of overall sales) grew by 28% yoy inFY01. % of FY2001 FY2000 Growth SalesSoaps 53 2,476 2,119 16.9Toilet soaps – Godrej brands (53% of turnover) 36
  37. 37. Godrej has the distinction of being the first company in the world todevelop technology to make soap with vegetable oils, way back in1930. In the early 90’s Godrej had created strong brand equities forits leading brands Cinthol, Ganga, Marvel, Evita etc. In 1994, Godrejentered into a strategic alliance with P&G for inter alia toilet soapbusiness, under which Godrej used to manufacture soaps, whichwere marketed by a joint venture company. However post marketingalliance with P&G, the company lost significant part of its marketshare and subsequently the arrangement was discontinued.Godrej’s entire distribution network was then taken over by P&G.Godrej reestablished a distribution network by utilizing the networkof group company Godrej Hicare for marketing of its brands and inFY00 took over the entire distribution network from them.The company has been very aggressive during the year in the toiletsoap business and has launched a number of new products in themarket in the last two years. It pioneered the concept of a fairnesssoap through launch of Fairglow soap. New variants like Sandal andNatural in the Godrej No.1 brand also aided high growth. Toilet soapvolumes of Godrej brands grew by 30% yoy in FY01. In value termssales grew by 17% yoy to Rs2.5bn. The company also launchednew brands like Godrej Nikhar during the year. The company’smarket share in toilet soaps improved marginally to 5.6% duringFY01. The company’s oldest and well know brand Cinthol isproposed to be repositioned and relaunched during FY02.Toilet soaps - Contract manufacturing (13% of turnover)Contract manufacturing of toilet soaps registered a 20% volumegrowth but grew by only 7% in value terms to Rs618mn. Marginsearned on 3P manufacture are significantly lower as compared to itsown brands. Margins on own brands are estimated to be 60% morethan that on 3P manufacturing. The company manufactured 45530tons of toilet soap in FY01. (32754 in FY00) Capacity utilization oftoilet soaps has improved from 46% in Fy00 to 64% in FY01. Segment Brands Market Market Share Share FY00 FY01Toilet Soap Cinthol, Fair Glow, Nikhar, 5.2 5.6 Ganga, Goderj No 1 37
  38. 38. CintholCinthol is the flagship brand of Godrej Consumer Products Limited.The brand was launched in 1952 as the first Deodorant Soap in thecountry.In 1960 Cinthol Deodorant Talc was launched. It continued to sell asa freshness talc thereafter. The brand, over the first three decadesof its existence, took the platform of protection from body odor.In 1986 , in an attempt to modernize the image "New Cinthol " soapwas launched with new look packaging , shape and advertisingusing celebrities like Vinod Khanna and Imran Khan . Thiscommunication campaign developed strong "confident" , "active"associations with Cinthol which became a part of the essence of thebrandGodrej FairGlowThe Godrej FairGlow fairness soap contains a powerful fairnessingredient Natural Oxy-G , which makes you fairer by reducing thedark melanin without changing the skins natural balance. Inaddition, it also removes blemishes to give you a clear, glowingcomplexion.Godrej FairGlow Soap was Indias first and is the largest sellingfairness soap. It helps you become fairer in a convenient way,simply through a daily bath. It is a quality Grade 1 fairness producthaving 76% TFM (Total Fatty Matter). It has a pleasant fragranceand is white in colour.Godrej no1Godrej no.1 is another popular soap from godrej product line , it isproved popular in the rural market due to the affordable price and 38
  39. 39. the quality offered.it comes in three colours and flavour, it is givinggood fight to the leading brands too.Godrej Shikakai soapThis is also one of the popular soap of the godrej product line. Thissoap is used to wash hairs. Many people believes shikakai as abest thing to wash the hair . black ,long and silki hairs are result ofutilization of the soap. This soap is giving fight to all the shampoofor washing the hairs. It is proved very popular among women.All of these soaps can be further classify in to three basic segmentsPrice Segments of Bath SoapsSegment Price WeightPremium > Rs.15 75 gm. Rs.8-1Popular 75 gm. 5Economy < Rs.8 75 gm.Godrej refreshes itselfGodrej Consumer Products has beaten the stagnation in the FMCGsegment through a host of initiatives that saw it introducing newprice points, enter new territory and strengthen its brands. 39
  40. 40. FORTIFYING its soap brands, introducing new price points,entering new categories such as babycare and hand sanitisers ... ithas been a busy year at Godrej Consumer Products Ltd (GCPL).While FMCG categories such as toiletries, hair care and soaps havebeen under pressure, the company has outperformed the stillsluggish FMCG industry primarily because it has been operating ona relatively smaller base compared to the biggies, and also becauseof the urban-centric nature of its brands.Focusing on its stronger and faster growing brands, the Rs 550-crore Godrej Consumer Products began the year by extendingGodrej No.1 ayurvedic soap to more markets and at an attractiveprice. At the same time it also decided to capitalise on the successof its FairGlow soap, instead of trying to push the languishingcream, to take on Hindustan Lever Ltd (HLL) in the fairnesssegment.In fact, Godrej is almost consciously targeting the fairness creamusers through its newly relaunched fairness soap. `The cool way tofairness and freedom from oily skin is the message the companywants to convey to all its prospective users. Launching the All NewFairGlow soap, Hoshedar K. Press, Executive Director & President,Godrej Consumer Products, said, "There is an increasing demandamong Indian women for convenient and inexpensive solutions toskincare and a need to look good naturally. The soap keeps thisneed in mind."FairGlow soap, a pioneer in its category whichmanaged to find a niche in the fairness market in spite of thelooming presence of HLLs mega brand Fair & Lovely, hasintentions of doubling its turnover from Rs 60 crore to Rs 120 crore 40
  41. 41. within the first year of the relaunch. The brand was relaunched lastmonth.According to industry observers, HLL is not in a position to push itsFair & Lovely soap for fear of losing its share in the fairness creammarket.This situation gives Godrej an opportunity to strengthen its positionin the fairness soaps category while phasing out its cream, which inany case did not manage to register any significant volumes.In fact, the company suffered a loss in sales for its toiletries divisionprimarily due to the failure of its FairGlow cream. Admits Press,"FairGlow cream did badly, leading us to withdraw the product. Ourtoiletries margins have been affected by its failure." Besides, GodrejShave Gel for men has also failed to register any significantvolumes.The relaunch of FairGlow soap is expected to add weight toGodrejs soap portfolio. Says Anand Shah, FMCG Analyst at ICICISecurities, "FairGlow has been registering declining sales over thepast two years. The All New Godrej FairGlow is aimed at femaleteenage college students instead of the previous positioning of thatfor women in their early 20s. This move could help GCPL build ayounger clientele and broaden its target base."Besides, the largest soap brand in Godrejs kitty, Godrej No. 1,managed to maintain robust growth and today accounts for nearly60 per cent of GCPLs toilet soap volumes. Its low pricing and value-for-money proposition has worked for the company and it has beensteadily increasing its variants with an ayurvedic offering.Observes Shah, "Toilet soaps are likely to maintain robust growth of15-20 per cent on the back of FairGlows relaunch and thecontinuing growth of Godrej No.1." The new unit for toilet soaps inHimachal Pradesh would also lead to an improvement inprofitability, as it is located in a tax-free zone. The unit wouldprovide income-tax relief and exemption from excise duty, which islikely to improve the companys soap margins. 41
  42. 42. Meanwhile, its Cinthol soap franchise has taken a backseat,primarily due to lack of proper positioning. "Cinthol as a brand hasbeen over-extended and we are in the process of redefining thepositioning," says Press. This is being done through a newcampaign and positioning statement which is likely to be unveiledsoon through its advertising agency, Orchard.Last year, Godrej decided to stretch the Cinthol brand to a handsanitiser. "There is heightened hygiene consciousness emergingamong consumers and we realised it would be ideal to introduce thehand sanitiser, a revolutionary concept for germ-free hands," saysPress. Godrej already supplies hand sanitisers under the Cintholbrand to West Asia. The SARS epidemic did help in gaining salesfor the product.Beefing up its rural initiatives to accelerate sales growth, Godrejalso decided to increase its rural penetration by introducing smallunit packs of its soap brands in the Bimaru States of Bihar, MadhyaPradesh and Uttar Pradesh. By introducing its three power soapbrands - Cinthol, FairGlow and Godrej No.1 - in 50gm SKUs (stockkeeping units), the prices of these respective brands have beenpegged between Rs 4 and Rs 5."We have decided to target these States with low per capitaincomes through our small unit packs. This will be a greatopportunity to grow since consumption levels of soap are still low inthese parts. These small pack sizes will not be made availablenationally and are meant specifically for these three States," saysPress. 42
  43. 43. Research methodologyNeed for studyFmcg sector is very vast and 4th largest sector in Indian economy inwhich different marketer use different strategies for the survival andmake profit from their products or brands. In this sector there is verytough competition between players.they are using large number ofadvertising,sales promotions, positioning, and pricing strategies.Research designWe have used secondary data as a source of this research.Data sourcesSecondary data:Web sites,Magazines,NewspapersLimitations of studyLack of sufficient material.Lack of time. 43
  44. 44. Five forces analysis of bath soap industrySUPPLYAbundant supply in metrosCompetition is beefing up their distribution network to penetrate therural areas.DEMANDAt an average GDP growth of 5.5% until February 2007, and thepresent consumer demand is set to boom by almost 60% over thisperiod.Most fmcg companies are awaiting to tap this latent.BARRIERS TO ENTRYHuge investment in promoting brands, setting of distribution networkand intense competition.BARGAINING POWER OF SUPPLIERSMany established players have a slight edge in bargaining powergiving the competition among suppliers.Some of the companies have backward integration, which reducesthe suppliers clout.BARGAINING POWER OF CUSTOMERSDue to increase in branded products, there is less chance that theconsumer can influence, but intense competition within fmcgcompanies result in value for money deals for consumers.(eggetting one soap free with one unit of soap) 44
  45. 45. COMPETITIONIn bath soap industry there are low profit margins about 5 – 10% butthey are selling in huge volumes.To beat the competition companies mainly use various strategieslike discounts and freebies.Unbranded players are size of Rs.1-3 billion and they are growingat the rate of 10%.Local players have no large distribution network so they are givingfight to the branded products by giving huge margins to retailerswhich is an important part of supply chain. 45
  46. 46. Hindustan Lever’s SWOT analysisStrengths: • With identified strengths including a • strong brand portfolio; • consumer understanding; • R&D ability; • distribution reach(networking) and high quality manpower • Strong media personalities • As the production is on large scale it has the benefit of economies of scale. • Being very old and reputed company, the company and its brands achieves highest trust of the consumers. 46
  47. 47. Weaknesses: • The companys weaknesses spotted thereby include • Increased consumer spends on education, consumer durable, entertainment, travel, etc resulting in lower share of wallet for FMCG; • Complex supply chain configuration and unwieldy number of stock keeping units (SKUs) with dispersed manufacturing locations; • Price positioning in some categories that allows for low price competition and high social costs in the plantation business.Opportunities: • HLL sees its opportunities as • market and brand growth through increased penetration especially in rural areas; • brand growth through increased consumption depth and frequency of usage across all categories; • upgrading consumers through innovation to new levels of quality and performance; • emerging modern trade to be effectively used for introduction of more upscale personal care products; • growing consumption in out of home categories; • positioning HLL as a sourcing hub for Unilever companies elsewhere and leveraging the latest IT technologies.Threats: • Perceived threats • span low-priced competition now being present in all categories; • grey imports • spurious/counterfeit products in rural areas and small towns; • changes in fiscal benefits. 47
  48. 48. Personal wash market: While the growth rate for the overallpersonal wash market is only 1 per cent compared to averagegrowth rate of 5 per cent, premium and middle-end soaps aregrowing at a rate of 10 per cent. The leading players in this marketare HLL (Lux, Lifebuoy, Breeze, Rexona), Nirma (Nima), GodrejSoaps (Cinthol, FairGlow, Shikakai, Nikhar), and Reckitt & Colman(Dettol). Growth in production of FMCG EstProduction (market 2002-2 % EST % Unit 2003-20size) 003 growth growth 04FMCG (overall) Rs billion 600 2% 609 1.5%Soap & Toiletries Rs billion 90 -5% 90.9 1%(overall)Soap & Toiletries Mn tonn 60 4% 60.09 1.50%(overall)Fabric wash market MN tonn 50 4% 50.25 0.50%Laundry soaps/bars Rs billion 53.3 -6.5% 50.64 -5%Personal wash Rs billion 45 5% 45.45 1%marketToilet soap Rs billion 42 -3.2% 40.11 -4.5% 48
  49. 49. Projected Growth in Production of FMCG Sector First two First two quarters quarters SECTOR UNIT (Apr-Sept (Apr-Sept 2003-04) 2004-05) Actual ProjectedFMCG (overall) Rs billion 1.50% 2%Soap & Toiletries Rs billion -4% 1.50%(overall)Soap & Toiletries MN tonn 2% 4%(overall)Fabric wash marketLaundry soaps/bars Rs billion -8% 0%Laundry soaps/bars MN Tonn -5% 1%Personal wash market Rs billion 7% 1.5%Toilet Soap Rs billion -5% 1.5% 49
  50. 50. SWOT ANALYSIS OF GODREJStrengths • Very old and trusted domestic company in India. • Good distribution network across the country. • Cinthol is one of the popular and strongest brand of the company. • Diversification of the products and deepens each product vertically. • Economical products with wide product line.Weaknesses • Medium focus on advertising as compared to other competitors. • Focused attention on cinthol brand. • Less focus on product variety. • Lack of promotion of its products by influential celebrities. • Lack of concentration on bath soap segment after diversification.Opportunities • Penetration in rural market area. • More brand loyalty of customers towards some of the brands. • Focusing more on its innovations and product variety it can become a global player. • Low market share, to be focused by aggressive marketing. 50
  51. 51. Threats • Trust factor and emotions attached to it due to the domestic company towards localites. • Due to successful backward integration it has a benefit of low cost production. • Major focus on effective advertising. • Best infrastructure. 51
  52. 52. Growth and expansion strategies in global scenarioMarket segmentationMost multinationals are active in almost all the regions profiled inthis report. Their global reach has been facilitated in part by theincreas ingly open economic policies that were being implementedby developing countries such as India and China during the 1990s.Corporate market expansion strategy by the multinationalorganizations has involved increased market segmentation to createa wide range of products especially in the toilet and laundry soapcategories. The main developments during the 1990s has thus beenthe growth of task specific products. The market for bath products inparticular, has shifted toward body cleansing, as well asmoisturising, as brands become more specialised. Traditional soapsare fighting back with a move toward nostalgia, and seem to beattracting consumers back to the products they know best.Mergers and acquisitionsProduction of soaps for distribution on the international market takesplace as near to national markets as possible. The distance of manyof the emerging markets from major industrial nations, and thesheer bulk of the bar soap and liquid soaps combine to make importuneconomical in most instances. While domestic manufacturerstraditionally tend to concentrate in their countries of origin, they areincreasingly seeking to increase revenues by venturing intoneighbouring countries. This situation is most common in Asia andLatin America.The main strategy used by companies wishing to enter othermarkets is a series of mergers and acquisitions. In addition, theyacquire manufacturing facilities and set up distribution agreementswith local companies.With the exception of East and Central Europe, m ost soap andother toiletry markets are becoming increasingly foreign. In LatinAmerica, Brazil stands out as an exception to this trend, having ahigh presence of domestic companies. 52
  53. 53. In Asia,domestic manufacturers such as Nirma and Godrej aregradually increasing theirdomestic market share, particularly at the lower end of theirmarkets.The acquisition of regional players represents a clear means ofestablishing or strengthening a position in a region. Acquisition isalso being used as a means of balancing the geography of aportfolio where a large player is weak in a particular country. Thisseems to have been a major factor in Unilever’s acquisition of HelenCurtis. The alternative to acquisition or creation of a manufacturingoperation in the target country, is to set up a licensing agreementwith a local manufacturer.How local companies are responding to multinational strategiesMany national soap manufacturers are matching the big player’sexpansion strategies by expanding into niche markets where brandloyalties are yet to form. They are becoming successful by quicklyidentifying and meeting consumer needs,and by offering more competitively priced products than themultinationals. Another strategy involves offering products at lowretail prices and with small value shares in several sectors withoutoccupying leading positions in any of them.While new product development will be important in the strategy ofniche players, it is unlikely that it will be as innovative as thatachieved by the global players. This is because investment fundsare not readily available in the same way, and new productdevelopment will therefore tend to take the form of brand and lineextensions. Nonetheless, many local manufacturers are identifyingand exploiting pockets of innovation in niche markets especially,where global players do not have dominant positions. In any case,the findings of this research indicate that many sectors of the globalmarket for soap are not yet saturated. It is believed that additionalsales growth can be generated by targeting specific consumergroups, for example, consumers in provincial and rural regions,health conscious consumers, mothers, children and teenagers. 53
  54. 54. ThreatsWithout exception, all the major players and other manufacturers inthe industry list the following issues as threats to the uninhibitedgrowth of theindustry:High government custom duties on essential imported rawmaterials; High production excise taxes which in some cases arehigher than the import duty on raw materials; High local energycosts including electricity and fuel; Increasing cost of policing theirproducts against local artisanal soap producers. This takes the formof increasing research and development, as well as advertising andpromotional expenditure to differentiate their products in the massor lower market segment from local ones.Loopholes in government customs machinery have led to the influx of grey imports, i.e. unofficially imported products in the local market. In addition, official relaxation of trade barriers in all regional markets has increased the entry of imported soap into most regional markets that were fairly stagnant in terms of new product d evelopment and launches.Competition has intensified significantly over the last five years andhas resulted in heavy corporate investment in a wider range oftechnologically advanced products and new product development ingeneral. This coincides with th e emergence of a more sophisticatedconsumer base, much greater segmentation in markets, andincreased demand for value added products.Basic products like bar soaps remain dominant in Asia, as the bulkof consumers in most markets earn low incomes and only buy lowcost items. However, this situation showed signs of change over thelast three years with bar soap increasing in value shire from 68.2%to 72.1%. This was due to consumers at the lower end of the markettrading up to more expensive types of soaps as their averageincomes increased. Liquid soaps became increasingly popular untilthe 1997 economic crisis caused consumers to economize. Thepopularity of liquid soaps and shower gels is due to their hygienicpackaging which makes them popular to use because, unlike barsoaps, it cannot be shared by members of the family for bodycleansing. 54
  55. 55. The regional market presents tremendous opportunities to the soapmanufacturer in terms of the share size of the formed population.With India’s population officially exceeding one billion at the end ofthe last century and China’s over 1.5 billion, the majority of themliving under the poverty line, appropriate marketing strategies areneeded to turn this region into an area of advantage for the industry.Unilever is the most dominant player in the region with Japanesecompanies,UnileverCountries of origin and bases: UK/ NetherlandsUnilever, the Anglo-Dutch consumer goods company is among theworld’s largest soap manufacturers. It is unusual in its structure,which involves two parent companies; Unilever NV and UnileverPLC. This structure relates back to the 1930s merger of the LeverSoap Company with the Dutch edible (oil) fats company NVMargarine Unie. Unilever started its involvement in the soap marketwith the manufacturers of Pearls toilet soap, a major force in thesoap industry. Since the mid 1980s Unilever Has further developedstrong position in the soap sector through acquisition of variousestablished brand names. Unilever has been building its soap(skincare) activities in the developing regions through acquisition. InEastern Europe, it acquired PTZ, the Czech state-owned producerof toilet soaps and skincare products in 1992. In 1995 the Singaporebased Haze Line Company was acquired from Glaxo for US$150million. This has strengthened Unilever’s skincare position in Chinaand South EastAsia. 55
  56. 56. Operating structureUnilever has operations in more than 90 countries which provide itwith a presence in every continent. Apart from direct presence,Unilever’s brands are on sale in a further 90 countries throughimport arrangements and agreements with local companies. Europeaccounted for over half of the company’s turnover and operatingprofit in 2000. When sales from European markets and NorthAmerica are combined, they account for 2/3 of global turnoverThe business coordinates its activities through divisions, These are(i) foods (which accounts for 50% of Group turnover in 2000) (ii)detergents, (iii) personal products including soap (accounting for14% of Group turnover in 2000) (iv) specialty chemicals (v) otherproductsCorporate strategyThe broad ranging interests of Unilever are underpinned by a strongcorporate strategy which focuses on the core activities and brands.The company has pursued a selective acquisition and disposalstrategy with net expenditures on disposals and acquisitionsamounting to over US$ 1billion in 1999.The company is also involved in Joint Ventures (JV) where thismethod is proved to be the most effective means of entering a newmarket For example, in Vietnam the company operates through twoJV agreements. Unilever also seeks to expand through organicmarket development where appropriate.The key to the company’s strategy is the importance of productinnovation. A world wide network of innovation centres is in placewhich allows rapid transfer of ideas and the identification of tailoringrequired for local or regional markets. While the company enjoys thebenefit of owning a number of global brands, its strategyemphasizes the importance of local requirements. The company iskeen to position itself as the “Multi-local Multinational”Leading brandsUnilever has significant involvement in the global soap marketthrough a portfolio of strong consumer brands marketed primarilythrough selective mass outlets. In the detergent market, the mostestablished brand is Omo in the fabric detergent sector. Omo is soldin over 50 countries with a wide number of formulations to reflect 56
  57. 57. local washing preferences. Its Lux, Rexon, Dove, Ponds andLifebuoy brands are presentin virtually every market around the world. Other leading brandsinclude Hellmann’s, Liptons, Knorr and Ponds.Future strategyUnilever is likely to continue to strengthen its presence in andfurther develop its soaps and bath /shower product lines. Thecompany will continue to use the Dove and Lux brands to expandinto new skincare related categories. These brands have strongconsumer loyalty which will allow the brands to cross sector barrierswith relative ease.Nirma LtdNirma is a private family firm, which dominates the Indian ruralmarket. Largest national detergent maker and second largest sellingsoap manufacturer. Success due to undercutting multinational rivalseg. Surf. Production facilities at 6 places in India. It was able to cutcosts with a model focused on the poor. Using a lower fat-towaterratio and indigenous oils in the formulation of the soap, thecompany was able to cut production costs dramatically, andproduce a more environmentally sound product. It produces a rangeof industrial chemical products which primarily serve as raw materialor intermediates for soap and detergent business. 57
  58. 58. Nirma has cut the cost of distribution by doing away withintermediaries. The product travels from the factory to the distributors doorstep. Though the distributors have slender margins,they make money from sheer volume sold. The company makesextensive use of wallpaintings for advertising. 58
  59. 59. FINDINGS & SUGGESTIONSTax reformsThe government has gradually removed the restrictions on importsof consumer goods in the country and also significantly reducedcustom duties. The domestic tax structure of these products,however, has not been rationalised to provide level playing field forcompetition. This is adversely affecting the growth of the FMCGindustry and could have far reaching adverse impact. The followingtaxation issues need urgent attention of the government:1) Extremely high incidence of tax on certain productcategoriesSome FMCG products such as shampoos, processed food, softdrinks and toiletries containing alcohol attract high rates of exciseduty and sales tax. The total tax incidence in some cases is morethan 60 per cent of the cost or more than 30 per cent of MRP. Suchhigh tax incidence hampers growth of these product categoriesbesides encouraging manufacture of spurious products andsmuggling.It is recommended that the total excise incidence of FMCG productsshould not exceed 16 per cent in the case of non food items andeight per cent in the case of processed foods. Similarly, the marginalrates of sales tax, which is currently in the range of 10 to 25 percent, should not exceed 12 per cent.2) Irrational domestic tax structure encouraging importsSignificant reduction in custom duty rates of consumer goods hasmade imported product cheaper as compared to indigenouslymanufactured products, due to irrational domestic tax structure. Forinstance, goods manufactured in India suffer from cascading effectsof taxes on inputs as additional cost compared to imports. 59
  60. 60. The cascading effect of sales tax and local levies on inputs used indomestic manufacture should be eliminated by providing eitherMODVAT credit or by introducing notional VAT covering bothcentral and state taxes on an urgent basis. Moreover, MRP-basedexcise duty is levied on a large number of FMCG products.Countervailing duty on the same product when imported is chargedon CIF value. The MRP based assessable value for excise dutydoes not allow abatement for post manufacturing costs such asadvertising and selling expenses whereas CIF value considered forthe purpose of import duty does not include costs of these elementsincurred subsequently by importers.This differential basis creates unfair competition as tax incidence ondomestic manufacture could be considerably higher in case of thoseproducts which incur significant marketing and distribution cost.There is a need to bring parity in tax incidence between domesticmanufacture and imports by including all such elements of postmanufacturing costs while deciding the abatement percentage ofMRP based duty.3) Inverted Duty structure for selected inputsDuty on certain raw materials is higher or the same as compared tofinished products in which these materials are used. Such rawmaterials include oils and chemicals like Soda ash, caustic sodaand LAB. In addition to customs duty, raw materials are also subjectto SAD/sales tax and octroi and therefore total tax incidence andcost of indigenous manufacture goes up. The import duty on rawmaterials needs to be rationalised so that it does not exceed 60 to70 per cent of the duty on finished goods.4) Need for rationalisation of taxes on processed foodsProcessed food industry, with its vertical integration with theagricultural sector has significant potential for employmentgeneration and economic growth. The existing tax structure and itshigh overall incidence, however, has been hampering the growth ofthe processed industry. The increase in excise duty in last year’sbudget from eight per cent to 16 per cent has adversely affected thegrowth of processed foods industry. It is recommended thatmarginal rate of excise duty on processed foods should not be morethan eight per cent and the sales tax should be levied at four percent. 60
  61. 61. 5) Cascading effect of Special Excise DutyThe special excise duty introduced last year is not "cenvatable’’except in the case of selected products. Most FMCG productscovered by tariff chapter 33 such as shampoos, ice creams andcosmetics are subject to SED. This tariff chapter also contains verywide definition of the term "manufacture’’ which includes labeling,relabeling or conversion of large packs into small packs. The levy ofSED on such products therefore leads to double taxation whengoods are labeled or converted into small packs after manufacture.It is recommended that SED should be made "cenvatable’’;alternatively the term "manufacture’’ needs modification , atleast forthe purpose of SED by excluding labeling, relabeling or conversioninto small packs. 61
  62. 62. Other suggestions1. A joint industry –government initiative for building a "Made inIndia’’ brand for FMCG products is required. With manymultinationals moving into the Indian FMCG market, a concertedmarketing strategy which creates strong brands will be needed forIndian FMCGs to gain recognition in the market.2. Better packaging materials are necessary as a large number ofFMCG products are perishable . The government must facilitatemore R&D in packaging materials as this will help in cutting wastesand costs in the sector. The possibility of a longer shelf life willencourage production of goods of higher value addition bycompanies in the sector.3. While import of most items has been allowed, the government isnot geared to prevent import of spurious products. In othercountries, FMCG goods have to be cleared by regulatory authoritiesbefore they are allowed to enter domestic shores. This is nothappening in India and the government needs to undertake acomprehensive crackdown on these products.4. The small-scale reservation policy should be reviewed as ithampers the growth of this sector. Many reserved products,including several FMCG products can be freely imported. Under thecurrent policy, not only are Indian producers of many FMCGproducts restricted from attaining economies of scale, they alsohave to compete against import that do not face constraints onsmall scale reservations.5. Food laws such as the PFA Act should be amended and be madecontemporary. 62
  63. 63. CONCLUSIONFrom the above detailed study of the FMCG industry with the focuson bath soap segment we can make out that FMCG is the mostemerging sector and industry not only in India but all over the world.The main leaders of the bath soap segment like HLL, NIRMA. ANDGODREJ are focused in the study which shows that HLL is theleader in FMCG industry and has a large amount of market shareabout 67% and even the growth rate. The main reason for thesuccess of some companies is their strategy and distributionnetworks.HLL is dominating due to its diversification, vertical and horizontalintegration, breadth and depth product line and innovative andcustomer oriented product introduction. Thus the company needs tofocus on its distribution channels, networking, marketing strategies,sales promotion etc to succeed in the market.From the study we can make out that nirma and godrej still needs alot market penetration in the urban market also with focus on thepremium class. 63
  64. 64. BIBLIOGRAPHYWebsites :www.infoline.comwww.nirma.co.inwww.hll.comwww.godrej.comwww.thehindubusinessline.comwww.google.comNewspapers:Business StandardEconomic Times 64